A Blog of Politics, Culture, and Philosophy

When it comes to political decisions that reek of “Chicago-style” thuggery, it’s hard to top the Federal Reserve’s decision last week to fail BB&T Bank’s most recent Dodd-Frank “stress test” :

“After flaunting some of the most impressive capital ratios in last week’s Dodd-Frank stress test results, BB&T Corporation (NYSE:BBT) shareholders were stunned to discover that the Federal Reserve “objected” to certain parts of the bank’s capital plan.” (Why the Fed Denied BB&T Corporation (BBT)’s Capital Plan, fool.com, March 14. 2013.)

Given the actual strength of BB&T’s reserves, its well-earned reputation for financial soundness, and the shock with which this news was received by the market, what should the reader make of the Fed’s decision? It doesn’t take a genius to recognize it as a politically motivated hatchet job — and specifically, as political payback for former BB&T CEO John Allison’s truth-telling in his book, “The Financial Crisis and the Free Market Cure”:

The Financial Crisis and the Free Market Cure by John Allison

Allison’s brilliant expose on the subject — drawn from decades of expert personal experience in the banking industry — should be required reading for any American who dares to think he has a clue about what caused the financial crisis. If you haven’t read it yet, then you owe it to yourself to do so as soon as possible.

This is a book that I CANNOT recommend strongly enough. In it, Allison demonstrates, in exacting detail, precisely how government misregulation, not “Wall Street greed,” was in fact the core cause of the crash. And he explains how new regulations introduced to deal with a crisis of the government’s own making are putting the US economy at risk of an even greater crisis in the future. I’m currently finishing my second time through it, and I’ll probably need a third reading to digest and integrate the wealth of facts it presents. It is that good.

So given this context, the obvious question becomes: what political goal is accomplished by “failing” the “stress test” of a bank whose financial position is so clearly superior to government standards that the market was “stunned” by the Fed’s decision? To use an already overused aphorism: “If it walks like a duck and quacks like a duck, it’s a duck.” This is a naked attempt to discredit now Cato Institute president Allison‘s critique by smearing the institution he led for decades — an institution whose whose well-deserved reputation for financial soundness is in fact one of the strongest pieces of evidence for the accuracyof that critique.

“BB&T’s BBT +0.51% capital was above regulatory thresholds but its dividend and stock buyback plan was rejected based on an qualitative assessment of its capital planning process. The Federal Reserve did not explain what specifically was the problem at BB&T.” [sic, emphasis added].

No, of course they didn’t “explain what was the problem at BB&T.” And that, ladies and gentlemen, is the kind of regime that America unwisely re-elected to power in 2012.

I’m no admirer of president Obama, but even I was surprised to hear him say something as idiotic and contemptible as this:

“If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business — you didn’t build that. Somebody else made that happen.“

Let me be absolutely clear, to anyone who may be prepared to fall for this line of so-called “thinking.” To the extent that anyone else had a part in our success, they were other individuals like ourselves, benevolently cooperating in voluntary exchange in a free economy. We, the world’s thinkers and entrepreneurs, created the civilization you are trying to take credit for — and for which you now insult our intelligence and our honor by trying to set yourself up as collector of unearned payments.

“Rearden laughed. ‘Eddie, what do we care about people like him? We’re driving an express, and they’re riding on the roof, making a lot of noise about being leaders. Why should we care? We have enough power to carry them along—haven’t we?'”

It is precisely such naive generosity that has allowed these parasites, like the bridge trolls of ancient folklore, to get away for so long with pointing to the accomplishments of industrial civilization and demanding tolls in it’s name. Now, to add insult to injury, they are openly presuming to demand them from the people who built the bridge in the first place — while simultaneously dynamiting its foundations, and screaming that someone has to pay for the resulting destruction.

The economic and social infrastructure of our nation is real, and it is a tremendous value. It raises the scope of our productivity from what would be possible to a man on a desert island, all the way up to the building of skyscrapers and everything in between. But it is the creation, not of government bureaucrats and community organizers, but of America’s thinkers and entrepreneurs. It is an achievement made possible by the remnants of capitalism that still remain alive in this country, which these hangers-on of virtue ride while doing everything they can to destroy it.

Their policies did not create our success or make it possible, and they certainly have no moral right to demand tribute for it. If anything, they have set us back decades compared to what we could have achieved under a system of undiluted freedom. They deserve not credit for that, but condemnation.

THIS is the open fraud of Social Security, that most Americans are disgracefully unaware of:

Social Security status-quo defenders have assured us for the past 25 years that Social Security is fully funded—for the next 25 years, or 2036. So if there are real assets in the Social Security Trust Fund—$2.6 trillion allegedly—then how could failure to reach a debt-ceiling agreement possibly threaten seniors’ Social Security checks?

The answer is that the federal government has borrowed all of that trust fund money and spent it, exactly as Krauthammer asserted. And the only way the trust fund can get some cash to pay Social Security benefits is if the federal government draws it from general revenues or borrows the money—which, of course, it can’t do because of the debt ceiling.

American citizens have the power to vote for representatives to run the government — and consequently, a moral obligation to learn and understand how important parts of our system work. The fact that most Americans don’t understand that there is nothing (and can be nothing) in the “Social Security Trust Fund” represents a massive failure of the most basic level of civic responsibility that comes along with the right of self-governance. For that reason, those who have abdicated this responsibility have no right to claim to be innocent victims when they finally do learn that Social Security is a government-run Ponzi Scheme with no actual assets. And they have no right to complain when it’s revealed that they’ve already lost everything that’s been taken from them in payroll taxes over the years.

The fact of the matter is that there is nothing in the trust fund but IOUs — that is, notes offering to raise the money to pay them back through further borrowing or taxes. If you don’t fully understand what that means, then take a moment to really consider it. Consider the outrageous injustice of the government taxing you to pay for your retirement, and then borrowing that money from itself and spending it — leaving a note in its place that it’ll just tax you and your children again tomorrow to pay you back for the taxes that it borrowed from you and your parents yesterday. That was money that you could otherwise have saved and invested to pay for your own retirement, without the need for government alms, and could have left to your heirs. Instead, it’s been squandered in an orgy of reckless government spending the like of which has never before been seen in all of human history, bringing the United States to the very brink of financial armageddon.

The money that we all paid in Social Security taxes over the years has already been spent. It is long gone. The only way to pay current recipients is to rip off the next generation, which has no chance of ever being repaid for their contributions. Well, if someone has to take the hit and not be repaid — and someone does, with any Ponzi Scheme when it finally collapses — then it should be the current and pending generations of recipients. They are the ones who are responsible for allowing such a corrupt system to continue for so long, and who fought against efforts to reform it in the previous decade. It should not be the innocent next generation that they’re planning to hand the tab for their reckless irresponsibility.

With an opinion like this one, why was I not surprised to learn that he served as Chairman of the Federal Reserve Bank of Kansas City? And he has the nerve to rail against people who object to being ripped off to bail out his politically connected banking buddies as “free market purists?” Give me a break.

Paul’s article is excellent, as always. Like my post, it shines a light on the “dirty secret” of Social Security: that everything that’s been “paid in” to the so-called trust fund over the years is now gone. There are no “assets” left in it except a promise to stick tomorrow’s workers with the tax bill for the already squandered payments of yesterday’s. As Thomas Jefferson implicitly observed (Jefferson on Future Debt), that’s a prospect and a burden that one generation has no right to impose on the next — and as I argue, that the latter has no moral obligation to accept.

This clever video won second place in the recent Atlas Shrugged Video Contest. It very effectively dramatizes the injustice of punishing competence and virtue, and rewarding incompetence and vice at its expense. It’s very apropos for the theme of “Repeal The Bailouts,” especially with the magazine headline and the comments at the end.

The Powerline blog has an incisive piece that’s worth reading on the astonishing disconnect from reality displayed by President Obama’s new 2012 budget proposal, and his comments on it at a subsequent press conference:

President Obama, with a breathtaking disregard for the facts, claimed that under his FY 2012 budget, the federal budget would no longer be running a deficit as of the middle of the decade… This is not a debatable point. This is a screen shot of page 171 of the Obama administration’s FY 2012 budget proposal. I have highlighted the row titled “Deficit.” You will see that Obama’s budget runs a huge deficit every year from now through 2021. [Link added]

Commentators so far seem to be torn between two (equally frightening) speculations on this: that the administration is simply clueless on the actual facts of the budget and doesn’t understand the numbers, or is being deliberately dishonest in how it presents them to the American people.

Regrettably, I lean toward the latter. This looks to me like a textbook example of a rhetorical technique that I often observed, and then named, many years ago in Usenet debates during the 1990s. I call it the Emperor’s New Clothes Gambit. It consists of brazenly offering a rationally indefensible assertion with exaggerated (and faked) self-confidence, in the hope that others without knowledge or confidence about their position will be intimidated by that tone and fail to challenge it. It’s related to (and something of a cross between) what Ayn Rand identified as the Argument from Intimidation and a scaled-down version of the “Big Lie” propaganda technique, particularly in its attempt to prey upon the reader’s or listener’s self-doubt and ignorance. That’s why I decided to name this post “The Emperor’s New Clothes Gambit, Take 1″ — and “Take 1,” unfortunately, because I anticipate the need for many more such takes in our foreseeable political future.

In any event it’s heartening to see this nonsense being challenged, for example by Senator Sessions in the following video clip:

“So I don’t think it’s a little bitty matter. I don’t think it’s subject to gentleman’s disagreement. I don’t think it’s subject to anything other than black and white — yes or no — is that an accurate statement or not? It’s not true.”

As reported in the news yesterday, The ‘Patient Protection and Affordable Care Act’ — colloquially known as ‘Obamacare’ — has been ruled to be unconstitutional, in its entirety, by a Florida court. This is the case in which26 US statesfiled suit (not including Virginia, which filed separately) to overturn the act.

In his ruling, Judge Roger Vinson found that the so-called “individual mandate” to buy health insurance violated the US Constitution. He further declared that since the individual mandate was not “severable” from the rest of the act, that all of it had to be thrown out:

For the reasons stated, I must reluctantly conclude that Congress exceeded the bounds of its authority in passing the Act with the individual mandate… Because the individual mandate is unconstitutional and not severable, the entire Act must be declared void.

Judge Vinson gets to the heart of the issue with this gem:

It is difficult to imagine that a nation which began, at least in part, as the result of opposition to a British mandate giving the East India Company a monopoly and imposing a nominal tax on all tea sold in America would have set out to create a government with the power to force people to buy tea in the first place. If Congress can penalize a passive individual for failing to engage in commerce, the enumeration of powers in the Constitution would have been in vain for it would be “difficult to perceive any limitation on federal power” [Lopez, supra, 514 U.S. at 564], and we would have a Constitution in name only.

Furthermore, Judge Vinson made it clear that that his ruling is intended to immediately stop the implementation of Obamacare:

“Injunctive relief is an “extraordinary…” and “drastic” remedy… It is even more so when the party to be enjoined is the federal government, for there is a long-standing presumption “that officials of the Executive Branch will adhere to the law as declared by the court. As a result, the declaratory judgment is the functional equivalent of an injunction.” See Comm. on Judiciary of U.S. House of Representatives v. Miers, 542 F.3d 909, 911 (D.C. Cir. 2008); accord Sanchez-Espinoza v. Reagan, 770 F.2d 202, 208 n.8 (D.C. Cir. 1985) (“declaratory judgment is, in a context such as this where federal officers are defendants, the practical equivalent of specific relief such as an injunction . . . since it must be presumed that federal officers will adhere to the law as declared by the court”) (Scalia, J.) (emphasis added).

“There is no reason to conclude that this presumption should not apply here. Thus, the award of declaratory relief is adequate and separate injunctive relief is not necessary.”

For the record I think that the last paragraph is a bit naive when applied to the scoundrels in the current administration. Indeed, I’ve already seen that assessment confirmed in news reports stating that the law will continue to be implemented, contrary to the clear language of the judge’s ruling:

“The White House, taking a long view of the many legal challenges to what critics call “Obamacare,” is continuing to implement key provisions of the law pending a final decision by the courts. The administration plans to appeal the Florida decision.”

There are many things that can be said about the moral and legislative debacle that has become known as ‘Obamacare,’ but I’ll restrict myself for now to the following observations. Over half of the US States object so vehemently to this law that they are suing the Federal government to have it enjoined. Members of many state legislatures have openly started talking about passing state laws to nullify it. Washington was flooded with letters and protesters against it when it was passed, and polls consistently show that over half of the country supports its repeal. And the first legislative act of a new House majority, swept into power by the largest swing in congressional representation in generations, was pointedly to pass just such a repeal. When all of that is happening nearly a year into its history, then there is something fundamentally wrong with the legislation in question.

There is no saving ”Obamacare.” It is fundamentally misguided, economically destructive, repugnant to the individual rights guaranteed by our nation’s constitution, and profoundly immoral. The sooner that it is permanently voided in its entirety, and we can turn to passing legislation that will actually reform health care in the US, the better. These would include such policies as the expansion of HDHPs and HSAs, reform of the discriminatory tax system, tort and mandate reform, and so on — in short, the basic reforms outlined in John Mackey’s Wall Street Journal Article from a year and a half ago. The Democratic majority in the 111th Congress deliberately shut out any discussion of these rational, common sense, and free market solutions to our health care crisis, and it is long past time that they were put back on the table.

The reason why statists have been so aggressive about spending other peoples’ money through government coercion is because, like most of the rest of our culture, they have been indoctrinated in the morality of altruism. They actually think that forced redistribution of wealth for the benefit of the “less fortunate” is moral, and they feel virtuous in doing it — and in doing it by force.

Too often, that belief serves as a rationalization for a deeper and uglier motive, which goes hand in hand psychologically and philosophically with altruism. That is the twisted attempt to give meaning and validation to their own sorry lives through what they do for others. The desire, and even the need, to control the lives of those others follows directly from that.

That’s why Ayn Rand always said that it’s not enough to advocate capitalism on “practical” grounds; it has to be defended on moral grounds. Until the morality of altruism is replaced in the minds and hearts of the people with a respect for reason, rights, individual sovereignty and dignity, and rational self-interest, the statists will remain armed with their most dangerous weapon: an evil and destructive moral code.

In order to accomplish this, what is needed is a moral and philosophic revolution led not by conservatives or “libertarians,” but by radicals for capitalism.

But with respect to future debt; would it not be wise and just for that nation to declare in the constitution they are forming that neither the legislature, nor the nation itself can validly contract more debt, than they may pay within their own age, or within the term of 19 years.

Thomas Jefferson: 1789

At least as indicated by this quote, Jefferson appears to have understood very well the immorality and destructiveness of running up public debt, and passing it on to the next generation to pay off. Yet that is precisely what our entrenched welfare state entitlements such as Social Security and Medicare do today.